Influencing Acquisition Performance in High Technology Industries: Role of Innovation and Relational Overlap

Acquisition represents an important activity that allows firms to adapt their resource configurations. Acquisition literature has focused only on the levels of innovation or relational resources, the primary dimensions of organizational resource bases. We argue that in addition to the levels, the degree of overlap between the two firms in terms of innovation and relational resources should influence acquisitions. Further, we argue for the importance of the quality of the target's resources along with factors influencing acquirer's absorptive capacity (CEO's functional background, acquirer's marketing intensity and acquisition experience) as contingencies. Using 319 biopharmaceutical acquisitions and a random effect regression model that accounts for unobserved heterogeneity and the endogeneity of relational and innovation overlap, we find that innovation overlap has a positive effect, whereas relational overlap has a negative effect on acquisition outcomes. Further, acquirer CEO's throughput background and acquisition experience negatively moderate, whereas target's innovation resource quality and acquirer's marketing intensity positively moderate the influence of innovation overlap; target's relational resource quality and acquirer CEO's throughput background positively moderate the influence of relational overlap.